Bounce Back Loan Scheme Advice
A few of our clients have applied and received the Bounce Back Loan Scheme. They are waking up to £50,000 in their bank account! This could well be the healthiest some businesses’ bank account has looked for some time, this is great news and an amazing opportunity for businesses to really invest and bounce back. However not managed properly and this could mean really bad news for your business.
Let’s talk about the loan, the requirements, the opportunity it represents for business owners, and the pitfalls you should avoid.
The Bounce Back Loan Scheme is being offered by the UK government as a form of financial relief for small and medium businesses. The loan amount granted ranges from 2,000 up to 50,000 GBP. Besides being based in the UK, the loan also requires that your business be formed on or before March 1, 2020, and in some way have been affected by the global pandemic. There are a few industries and business types that don’t qualify for the loan based on state funding and other factors.
You can apply for this loan through one of the 23 partner lenders of the British Business Bank. You may also use a broker for a more customized experience where your information will be collected and matched with the lender you are most likely to get approval from. The loan repayment is spread out over six years, and there is no interest or fees for the first year of the loan. When the loan is due for repayment, it is reported that the interest rate is under 3%. If by chance, you do not get the approval, you can re apply with another lender.
Now let’s move on to the benefits of receiving the loan and what this cash injection can create for your business.
Just a warning, now that you have an injection of cash in your bank account, it is tempting to spend it without a plan or strategy because £50,000 seems like a lot of money. However, it is more important than ever that you pause and take a moment to think through your goals, business plan, sales strategy, and cash flow forecast. Ask yourself, have you had the desire to outsource some of your day to day tasks? Is this the time that you can afford to bring on a virtual assistant?
Or maybe now you can hire your first employee. Or perhaps this the time to invest in that software to help you manage your client load more efficiently. Consider investing in the next product that you can create to drive sales in your business. Whatever you decide to do, make sure you measure your return on investment and measure your cash flow.
Do not just start spending the money because you will find yourself looking for the next economic relief loan in a year’s time. Consulting with financial experts is a great way to get advice and guidance on the next moves you need to make to ensure your business’s success. Contact us today to book you a consultation and get your customized financial strategy.
It is also not widely reported that the loan is purely for business purposes to be used to draw dividends, if your profits don’t support dividends you will be triggering a 32.5% tax charge in a year’s time because of an overdrawn director loan account. You can use it to cover salaries so if it is needed personally and you don’t have the required profits to pay as a dividend you will need to process it through a PAYE scheme.
For more information on the Bounce Back Loan Scheme, you can read the article here.